At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, QROPS and now QNUPS (Qualifying non UK Pension schemes).

The Euro retraced losses yesterday as the recent talks of a Greece debt re-structure were put to the back of investors’ minds, as a possible solution to resolve the debt issues would be through bond buybacks. Strong demand at a Spanish Bond auction created risk appetite and the single currency progressed across the board.

Sterling made a surge against the dollar but fell back against the euro, as Eurozone data continues to better that of the UK. Recent manufacturing data has been particularly strong, and unemployment levels have recently fallen in the Eurozone. On top this interest rates were hiked last month by 0.25% and the ECB have given indications that further hikes could follow soon.

The UK was looking likely to push rates up as early as May this year, as the economy grew nicely in Q3 2010, and inflation continued to rise to double the BoE target. But due to poor Q4 GDP figures in 2010 which showed a retraction, and recent inflation figures showing a reduction in inflation, the worry is that an increase in interest rates in the UK could damage economic growth.

Yesterday’s BoE minutes showed no change from the previous voting which show a 6-3 split in keeping rates at where they are. Markets now don’t expect to see a rate rise until October/November, however a good size growth in Q1 GDP figures which are released 27th April could bring this back. However another retraction would be devastating for the economy, meaning a double-dip recession would have taken place. This would also give investors no good reason to hedge their bets on Sterling.

Yesterday’s data and releases left Sterling trailing to the Euro moving from over €1.14 at the close on Tuesday, down to as low as around €1.1280. The Euro pushed above $1.45 against the dollar as the US continues to discuss its huge deficit issues, and the pound pushed above $1.64 as the dollar was sold off.

Today’s data to look out for is UK Retail sales figures at 0930am which are expected to fall for the 2nd consecutive month, as rising food and fuel prices and economic uncertainty damage consumer morale. Public Net Sector borrowing is also out at 09.30am.

In the US Jobless claims and House Price index are the key releases for the day.

IN THE UK

• Bank of England minutes reveal a more cautious outlook and suggestions of an interest rate rise in May have all but disappeared.
• Concerns are, although is inflation is set to rise further perhaps to 5%, disappointing growth in wages holds back rate hikes
• For the time being, investor’s eyes are now focused on 1^st quarter GDP figures released on 27^th April.
• This morning sees UK Retail Sales revealed a rise of 0.2% whilst most in the market were expecting another fall following on from last month’s surprise drop. Sterling responds immediately and rises in most pairs.
• UK Mortgage Approvals fall to 44k from 46.97k last month; figure is mainly overshadowed by retail sales and has little effect.

ELSEWHERE

• US dollar falls across the board as a rise in risk appetite ensures safe haven currencies are sold off. Investors look at positive data releases globally and even though some of that positive data is released in the US, the dollar falls. Perhaps we are returning to the scenario from a few years back where the better the US data the weaker the dollar.
• European policymaker puts forward possible solution of Greek bond buy-back auction to ease debt recovery and successful Spanish bond auction helps to ease some of the debt worries of the last week.
• EU looks to raise spending and angers countries which have recently made a series of spending cuts.
• Euro hits 15 month high against US dollar breaking $1.46 during Asian trading this morning.
• Gold continues to rise hitting $1509.50 as investors look for wealth protectors against inflation
• Many other currencies are positioned to break key technical and resistance levels against an ailing US dollar.

DATA TO LOOK OUT FOR

• Canadian Retail Sales (Feb) released at 1.30pm, markets are anticipating figure of 0.5%, up from -0.3 previously.
• 1.30pm, US Initial and Continuing Jobless Claims both can affect USD despite being less important than Non-Farm Payrolls data.
• US Housing Price Index at 3.00pm completes a busy day of data, combined with the labour market figures, housing figures in the US carry particular importance as a leading indicator of economic conditions.

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currencyoptions available for Pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

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